Monthly Archives: November 2014

Respondent Bayan Telecommunications, Inc. (Bayantel) is a legislative franchise holder under Republic Act (R.A.) No. 3259 (1961) to establish and operate radio stations for domestic telecommunications, radiophone, broadcasting and telecasting. Section 14 (a) of R.A. No. 3259 states: “The grantee shall be liable to pay the same taxes on its real estate, buildings and personal property, exclusive of the franchise, xxx”. In 1992, R.A. No. 7160, otherwise known as the “Local Government Code of 1991” (LGC) took effect. Section 232 of the Code grants local government units within the Metro Manila Area the power to levy tax on real properties. Barely few months after the LGC took effect, Congress enacted R.A. No. 7633, amending Bayantel’s original franchise. The Section 11 of the amendatory contained the following tax provision: “The grantee, its successors or assigns shall be liable to pay the same taxes on their real estate, buildings and personal property, exclusive of this franchise, xxx“. In 1993, the government of Quezon City enacted an ordinance otherwise known as the Quezon City Revenue Code withdrawing tax exemption privileges.

ISSUE

Whether or not Bayantel’s real properties in Quezon City are exempt from real property taxes under its franchise.

RULING

YES. A clash between the inherent taxing power of the legislature, which necessarily includes the power to exempt, and the local government’s delegated power to tax under the aegis of the 1987 Constitution must be ruled in favor of the former. The grant of taxing powers to LGUs under the Constitution and the LGC does not affect the power of Congress to grant exemptions to certain persons, pursuant to a declared national policy. The legal effect of the constitutional grant to local governments simply means that in interpreting statutory provisions on municipal taxing powers, doubts must be resolved in favor of municipal corporations.

The legislative intent expressed in the phrase “exclusive of this franchise” cannot be construed other than distinguishing between two (2) sets of properties, be they real or personal, owned by the franchisee, namely, (a) those actually, directly and exclusively used in its radio or telecommunications business, and (b) those properties which are not so used. It is worthy to note that the properties subject of the present controversy are only those which are admittedly falling under the first category.

Since R. A. No. 7633 was enacted subsequent to the LGC, perfectly aware that the LGC has already withdrawn Bayantel’s former exemption from realty taxes, the Congress using, Section 11 thereof with exactly the same defining phrase “exclusive of this franchise” is the basis for Bayantel’s exemption from realty taxes prior to the LGC. In plain language, the Court views this subsequent piece of legislation as an express and real intention on the part of Congress to once again remove from the LGC’s delegated taxing power, all of the franchisee’s (Bayantel’s) properties that are actually, directly and exclusively used in the pursuit of its franchise.

Private respondent Express Telecommunications Co., Inc. (ETCI) obtained from Congress Republic Act No. 2090 a franchise to establish radio stations for domestic and transoceanic telecommunications. Petitioner PLDT invoked the “prior operator” or “protection of investment” doctrine in its opposition to ETCI’s subsequent application for Certificate of Public Convenience and Necessity (CPCN). The National Telecommunications Commission (NTC) granted provisional authority to ETCI subject to the condition that it shall enter into “interconnection agreement” with PLDT. PLDT elevated the case to the Supreme Court pointing out ETCI’s defective legislative franchise to operate telecommunications system, among others. ETCI contends that PLDT’s special civil action must deal only on issues whether the NTC acted without jurisdiction of with grave abuse of discretion in granting ETCI the assailed provisional authority.

ISSUES

Whether or not:

(1) ETCI is entitled of provisional authority;

(2) R.A. No 2090 partakes ETCI’s valid legislative franchise;

(3) PLDT may refuse NTC Order to enter into “interconnection agreement” with ETCI;

RULING

(1) YES. The provisional authority is granted in a very limited sense: for a period of 18 months which may be revoked or revised by NTC, and applicable only in Metro Manila. Contrary to PLDT’s contention that it is nothing short of a Certificate of Public Convenience and Necessity (CPCN), basic differences exist. The issuance of CPCN is still subject to the exclusive prerogative of the NTC after full evaluation of the application.

(2) YES. The NTC construed the technical term in R.A. No. 2090 “radiotelephony” liberally as to include the operation of a cellular mobile telephone system. The construction given by an administrative agency deserves great weight and respect. To otherwise question the validity or applicability of R.A. No. 2090 is a collateral attack on the statute which is not allowed. A franchise is a property right and cannot be revoked or forfeited without due process of law. The determination of the right to the exercise of a franchise, or whether the right to enjoy such privilege has been forfeited by non-user, is more properly the subject of the prerogative writ of quo warranto.

(3) NO. The PLDT cannot justifiably refuse to interconnect. The interconnection which has been required of PLDT is a form of “intervention” with property rights dictated by the encompassing objective for the common good. The NTC, as the regulatory agency of the State, merely exercised its delegated authority to regulate the use of telecommunications networks when it decreed interconnection.

Private respondent Smart Communications, Inc (Smart) filed with the NTC a Complaint to effect the interconnection of their SMS or texting services with petitioner Globe Telecom, Inc. (Globe). Globe pointed out procedural defects in Smarts complaints and moved to dismiss the case. I also pointed out that another network, Islacom, was allowed to provide such service without prior NTC approval. The National Telecommunications Commission (NTC) ruled that both Smart and Globe were “equally blameworthy” and issued an Order penalizing both on the ground of providing SMS under Value Added Services (VAS) without prior approval from the NTC. The Court of Appeals sustained the NTC Order.

ISSUES

Whether or not:

(1) Globe may be required to secure prior NTC approval before providing SMS or texting services;

(2) SMS is a VAS under Public telecommunications Act (PTA) of 1995;

RULING

(1) NO. The NTC may not legally require Globe to secure its approval for Globe to continue providing SMS. This does not imply though that NTC lacks authority to regulate SMS or to classify it as VAS. However, the move should be implemented properly, through unequivocal regulations applicable to all entities that are similarly situated, and in an even-handed manner. This should not be interpreted, however, as removing SMS from the ambit of jurisdiction and review by the NTC. The NTC will continue to exercise, by way of its broad grant, jurisdiction over Globe and Smart’s SMS offerings, including questions of rates and customer complaints. Yet caution must be had. Much complication could have been avoided had the NTC adopted a proactive position, promulgating the necessary rules and regulations to cope up with the advent of the technologies it superintends. With the persistent advent of new offerings in the telecommunications industry, the NTC’s role will become more crucial than at any time before.

(2) NO. There is no legal basis under the PTA or the memorandum circulars promulgated by the NTC to denominate SMS as VAS, and any subsequent determination by the NTC on whether SMS is VAS should be made with proper regard for due process and in conformity with the PTA. The Court realizes that the PTA is not intended to constrain the industry within a cumbersome regulatory regime. The policy as pre-ordained by legislative fiat renders the traditionally regimented business in an elementary free state to make business decisions, avowing that it is under this atmosphere that the industry would prosper. It is disappointing at least if the deregulation thrust of the law is skirted deliberately. But it is ignominious if the spirit is defeated through a crazy quilt of vague, overlapping rules that are implemented haphazardly.